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City of Colorado Springs files appeal to PERA ruling about Memorial Hospital

Caption +Ricardo Munoz of RMS Sign Co. puts a new banner bearing the University of Colorado Health logo over an existing Memorial Hospital sign Aug. 28, 2012 after it was announced that Colorado Springs voters had voted Tuesday to lease the city-owned hospital to University of Colorado Health (Gazette File)

Colorado Springs attorneys filed an appeal in the city's dispute over whether it owes the Public Employees' Retirement Association millions in pension liabilities for Memorial Hospital employees.

The move after a retired Adams County judge ruled in favor of PERA on Feb. 11 - a decision that was "truly the first of its kind in Colorado," according to the city's motion, released Tuesday.

"No Colorado court - let alone the Colorado Supreme Court or Court of Appeals - has ever decided, let alone addressed, whether this type of leasing-privatizing transaction triggers" a series of steps resulting in payments to PERA, the city argued in its motion.

A call to PERA's general counsel seeking comment wasn't returned Tuesday evening.

The appeal is the latest in a dispute between the city of Colorado Springs and PERA that began when the city leased Memorial Hospital to University of Colorado Health on Oct. 1, 2012.

In doing so, it pulled about 4,000 employees out of the pension fund - leaving PERA officials concerned about a massive pension account's actuarial soundness.

Two weeks ago, Harlan Bockman, a privately hired judge, ruled that the city ignored the process for leaving PERA.

Specifically, city officials never sought approval from PERA's board and didn't seek a vote from hospital employees before pulling them out of PERA. Most importantly, the city didn't pay any unfunded pension liabilities to PERA, the judge said.

PERA has sought $190 million to cover those pension accounts, as well as interest. As of Oct. 28, that interest reached $15 million, and it continues to grow.

In filing its appeal, city attorneys questioned whether that departure process applies "when a municipality leases the operations of its wholly-owned public hospital," the motion said.

In the past, city attorneys have argued that the city owes nothing because Memorial wasn't moving to another public entity, but a private one.

Also, they argued at a January hearing that Memorial was still technically a PERA entity - even if it had no employees - because it was still owned by the city.

The type of appeal filed by the city on Monday is called an interlocutory appeal, which is used specifically for cases that have yet to receive a final ruling.

One possible reason the city chose that type of appeal is that Bockman's Feb. 11 ruling did not include a specific monetary amount owed to PERA - a detail highlighted by city attorneys in the wake of his decision.

It remained unclear Tuesday evening whether Bockman has signed off on the city's request seeking an appeal. Either PERA or Bockman must certify the city's motion for the appeal to move to the Colorado Court of Appeals.

City attorneys expressed optimism in their motion that an appellate ruling could finally resolve the dispute - largely because the court could offer the state its first opinion on such a matter.

The outcome could have major implications for a foundation established to oversee all money given to the city from UCHealth.

So far, $259 million remains tied up in escrow awaiting the case's resolution, $185 of which was specifically earmarked for any possible pension liabilities.

Before word emerged of the appeal, board members overseeing the Colorado Springs Health Foundation met Tuesday to discuss forming vision and mission statements.

"One way or another we're going to have some money," said Jon Medved, the board's president. "And if it's even at the low end of what they're talking about, it will be several millions of dollars."

At times, though, they lamented being hamstrung by the uncertainty looming over the foundation's finances - for example, when considering whether they should strive to make El Paso and Teller counties "the healthiest counties in Colorado."

"The challenge I have is, I like bold," said R. Thayer Tutt Jr., a board member and the El Pomar Foundation's president and chief investment officer. "And I think a $250 to $300 million foundation, that is reachable at different levels.

"But a $50 million foundation, I don't think it is."

Tutt later acknowledged that other foundations have done good work with far less money.